BTC

ETH

S&P Futures 500

$67,744.51

$3,518.60

$5,300.25

(+7.41%)

 (+8.98%)

(+1.20%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)

GM Treehouser 🌳

Welcome to our Treehouse Daily newsletter, where Treehouse brings you financial news and insights free daily! We believe you’ll find this helpful.

Also, in case you have missed it, check out our latest research piece 👇

February 2024 Market Recap

You can also access our research articles on the Bloomberg Terminal with the command “NH TRH < GO >"!

Our Daily View

What We Are Covering Today

  • Fed maintains rate cut plan, spurring market rally; Alibaba divests XPeng shares, reshaping ties (More in Macro & TradFi)
  • Blackrock announces tokenized asset fund on ETH; Ethereum Foundation under inquiry by state authority (More in DeFi & CeFi)
  • BTC MVRV may suggest the beginning of a large bull market; ASOPR implies that the selling pressure may have subsided (More in On-Chain)
  • IVs start to decline and stabilize; Term structure back to contango shape following previous backwardation (More in Crypto Derivatives)
  • BTC consolidates at $67K support level; ETH breaks descending channel with bullish implications (More in Crypto Technical Analysis)

Macro & TradFi

The Federal Reserve announced its decision to uphold its plan for three quarter-point interest rate cuts this year, despite keeping rates unchanged and revising its GDP growth forecast upward. This announcement triggered a significant rally in US equity markets, with the S&P 500 and Nasdaq Composite reaching record highs. This decision reflects the Fed's optimism about the economy's performance, as highlighted by Fed Chair Jay Powell, and indicates a strategic move to transition from aggressive measures to control inflation, which surged post-COVID-19, towards fostering economic growth. The Fed's approach, balancing between growth projections and slight inflation adjustments, suggests a cautious yet optimistic outlook for the economy's trajectory. Despite the higher forecast for economic expansion and core inflation, the Fed aims to gradually reduce interest rates, underlining a commitment to achieving a "soft landing" amid inflationary pressures and signaling a potentially dovish stance in monetary policy. 

Elsewhere, Alibaba Group Holding recently divested approximately 33 million US-traded shares in electric vehicle (EV) manufacturer XPeng, generating $317 million. Managed through its subsidiary Taobao China Holding, the shares were sold at $9.60 each, slightly below the market price, after Alibaba had previously sold 25 million XPeng shares in December. Additionally, XPeng announced the termination of an agreement allowing Taobao China to nominate a director to XPeng's board, signaling a shift in their partnership dynamics. Despite this, both companies have expressed intentions to maintain collaboration across various domains including R&D and marketing, and to seek new opportunities for joint ventures in the future. This divestiture may be indicative of a strategic retreat from direct involvement in the electric vehicle sector amidst escalating US-China trade tensions and intensifying market competition.

US stock markets experienced a notable rally, with all three major indices reaching new all-time highs, following the Federal Reserve's decision to maintain interest rates at a 23-year peak while aligning with market anticipations of three rate cuts in 2024. The S&P 500 index enjoyed a 0.89% increase, slightly outshined by the Nasdaq Composite's 1.15% rise, largely driven by significant advancements in the technology sector. The Dow Jones Industrial Average also saw a commendable increase, climbing by 1.03%. Boeing was a significant contributor to the rally, which saw a 3.67% increase amid news of potential sales of at least two defense businesses. Additionally, the financial markets are attentively awaiting the Bank of England's interest rate decision, to be announced today at 20:00 SGT, and Japan's CPI data release scheduled for tomorrow at 07:30 SGT. 

CeFi & DeFi

  • BlackRock announces new fund on ETH
  • Ethereum Foundation faces government inquiries
  • Coinbase’s Base Chain warns of “stuck” transactions
  • Do Kwon's extradition appeal rejected

BlackRock has announced the launch of its BlackRock USD Institutional Digital Liquidity Fund, a tokenized asset fund on the Ethereum network. This new fund, represented by BUIDL tokens, is backed by cash, U.S. Treasury bills, and repurchase agreements, offering daily yield payouts via blockchain to its token holders. BlackRock has also strategically invested in the asset tokenization platform Securitize, which will facilitate the transfer of the tokenized fund. Other key players in the fund's ecosystem include BNY Mellon as the custodian, along with Anchorage Digital Bank NA, BitGo, Coinbase, and Fireblocks. This initiative is part of BlackRock's broader digital assets strategy, aiming to develop practical solutions in the digital assets realm for its clients. The fund's introduction follows recent ventures by other financial institutions into asset tokenization. BlackRock CEO Larry Fink has previously hinted at the company's trajectory towards tokenization, seeing it as a stepping stone to bridging digital assets with mainstream finance. Tokenized U.S. Treasuries are now valued at $730 million.

The Ethereum Foundation finds itself at the center of a discreet inquiry by an unidentified state authority. The U.S. Securities and Exchange Commission (SEC), which has previously shown openness to Bitcoin ETFs, has maintained a cautious approach regarding Ethereum-based ETFs, despite the mounting interest from investment firms. In a consequential development reported by Fortune, the SEC appears to be exploring the classification of ETH as a security, which would have considerable ramifications for Ethereum's future and the wider digital asset markets. The ongoing scrutiny includes investigative subpoenas directed at U.S. companies, details of which remain under wraps. The Ethereum Foundation, known for its transparency, has not publicly addressed this inquiry. Changes on the Foundation's website, including the removal of a warrant canary—a subtle alert to undisclosed government demands—may hint at such an investigation, though this remains unconfirmed.

On-Chain

According to an analysis by @OnChainCollege, the MVRV value of BTC has again reached an abnormally high level. MVRV is the ratio between Bitcoin’s market cap and realized cap, which tends to serve as a valuation metric for BTC at any point in the market cycle. Historically, a heightened MVRV level, indicated by an MVRV of above 2.4, has generally indicated the start of a period of rapid appreciation in BTC price. Consequently, investors should look out for an extended period of MVRV to ensure that this is not a single point of anomaly.

Meanwhile, another analysis on @cryptoquant suggests that the Average Spent Output Profit Ratio (ASOPR) is a crucial indicator for understanding investor behavior in the cryptocurrency market. When the ASOPR dips below 1, it generally signifies that investors are selling their assets at a loss, often indicative of heightened market volatility or panic selling. This typically precedes a potential local bottom, where selling pressure subsides, which may aid traders in identifying potential turning points in market trends.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH increased to 77.06% and 77.48%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC and ETH increased to 2.70% and 0.11%, respectively.
  • The futures market witnessed $391.84M in liquidations, with shorts representing 51.8%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

64.47%

ETH

OKX

dYdX

58.05%

ETH

Bybit

dYdX

56.87%

DOGE

OKX

dYdX

Notes:

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, and DOGE vs. USDT perps. 

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.

Today's Bitcoin (BTC) ATM Implied Volatility (IV) chart reveals that both the 7-day and 30-day maturities have decreased and are starting to stabilize. Following the Federal Open Market Committee's (FOMC) decision not to cut rates, the market's response is visible in the stabilization, reflecting a reassessment of volatility expectations after the news. The 7-day IV has had a noticeable convergence with the 30-day IV, which may be indicative of short-term volatility aligning more closely with medium-term expectations as BTC's price climbs back towards $68K. If BTC continues to hold or increase from the $68K level, this could further reduce the IV as confidence in market stability grows.

The term structure for Bitcoin (BTC) has reverted to a predominantly contango state, following a period of backwardation. This transition suggests that the market's expectations for future volatility have normalized, with the anticipation of higher volatility in the long term relative to the immediate future. However, the persistence of backwardation characteristics in extremely short-term periods, particularly in 1 or 2-day expiries where IV remains higher than later maturities, indicates a residual caution among traders regarding short-term downside risks.

Today's BTC's 25 Delta skews reveal a continued divergence between the 7-day and 30-day maturities. The sharpening of this divergence could reflect a tempered reaction to short-term market movements or events, potentially indicating a reaction to BTC’s price surge in the past 8 hours. The reduced demand for short-term protective puts, inferred from the lower 7-day skew, might also be a consequence of recent market developments. The increasing 30-day skew also suggests that the market still has some medium-term uncertainties on the horizon.

In today's trading session, @Paradigm reported the following BTC and ETH options trades: BTC saw a 400x Call for 29-Mar-24 at $69K, a 250x Put for 22-Mar-24 at $60K, and a 200x Call for 27-Sep-24 at $100K, all bought. There were also purchases of 150x Puts for 26-Apr-24 at $62K and $67,150, with 150x Puts for the same date sold at $62K and $65,233.4. For ETH, there was buying activity with a 3500x Put for 29-Mar-24 at $3K, a 3250x Put for 5-Apr-24 at $3K, and a 2500x Call for 26-Apr-24 at $4K. Additionally, a 2000x Strangle for 29-Mar-24 at $3.1K/$3.2K was bought, and a 1750x Custom Fly for the same date with strikes at $3.4K to $4K was sold.

Crypto Technical Analysis

In technical analysis, it's noted that on the 4-hour BTC chart, the price has consolidated around the $67K level after a recent upward move. The price structure, highlighted by the recent candlesticks, indicates an influx of buying interest at these levels, which could be a stabilizing factor following the prior retracement. Should the market sentiment shift and the price move downwards, we might anticipate a test of the support near the $64K zone, a 4.5% decrease from the current level. On the flip side, the market faces resistance around the $70K mark, and a breakthrough could signify a continuation of the uptrend. The RSI, stationed at 57, underscores a neutral momentum, suggesting a balance in market forces without any immediate indication of overextension. The modestly ascending RSI trajectory may imply that buyers are gradually gaining ground. Market participants should keep a vigilant eye on these technical aspects to evaluate the market's direction.

Moving to ETH, on the 4-hour chart, the price has made a noteworthy advance outside of a descending channel, which could be interpreted as a bullish signal as ETH trades near $3.52K. This breakout could now transform former resistance into a support level. If this new support holds, the next resistance to watch would be around the $4K level, implying a possible 13.7% ascent from the present price. However, if Ethereum fails to sustain its position above the previous channel resistance, it could potentially find support either at the upper boundary of the descending channel or lower, around the $3.4K level, which previously acted as resistance within the channel. The RSI reading is approximately 54, hinting at a modest bullish divergence as it rebounds from lower levels, although still within a generally neutral range. This recent breakout from the descending channel needs to be monitored for sustainability to confirm a bullish continuation or a potential false breakout.

Access institutional-grade commentary on TradFi × Crypto markets

By Treehouse Research

Daily Readings

TradFi

Crypto

Deal Flow

Yours sincerely,
Treehouse Research 🌳